When MBank announced in January that they would accept accounts from marijuana-industry customers, it briefly seemed as though the banking problems for the newly legal industry in Colorado might finally have a solution. However, that hope was quickly doused when, after only a week, they backed out of the Colorado market citing lack of infrastructure. However, insiders recognize that because any type of bank or credit union must receive approval from the Federal Reserve prior to opening is the real reason behind the inability of MBank to move forward with its plans for opening bank accounts for cannabis industry related businesses.

What does this mean for the Colorado cannabis industry?

The status quo remains in effect, which is to say that even having bank accounts, for marijuana-tenanted properties remains just out of reach for the nearly 2,200 retail, manufacturing, and grow businesses in Colorado (as reported by The Denver Post). Although everyone agrees that requiring all these business to deal in cash creates a dangerous situation in terms of potential violent crime, no one solution can be found until the Feds agree to allow banks to hold these accounts.

How can hard money loans help?

A few hard money lenders are stepping into the gaping hole left by traditional lenders (whose hands are tied by Federal regulations) and offering hard money loans to owners of marijuana-tenanted properties. These loans can assist those property owners who have had their bank loans called upon the discovery of marijuana tenants. These private capital funded loans are proving to be of significant value for those investors who wish to take advantage of the increased value of retail or warehouse properties that are zoned and/or outfitted for cannabis tenants.

Although hard money loans are typically short-term solutions (ranging from six months to two years), many lenders are willing to offer extensions on these loans when necessary. There is still hope in the budding cannabis industry that a more mainstream banking solution will be found in the next few years, thus allowing those who have taken out hard money loans now to refinance when their loans eventually come due. Hard money loans are also beneficial to landlords of marijuana-tenanted properties because most require interest-only payments until the bulk of the loan comes due.

Hard money lenders who are willing to extend funding to owners of marijuana-tenanted properties are a crucial part of the chain in an industry on shaky financial footing. Without this funding, it would be very difficult for investors to purchase properties that could be leased to marijuana tenants. When one considers the very expensive cost of putting in the infrastructure (inside a warehouse) that is needed to enable the grow businesses to operate, it is even more clear why the ability to borrow funds from private capital lenders plays a critical role in the growth of the cannabis industry in Colorado.

If you are in need of funding for a marijuana-tenanted property, or if you want more information about Montegra’s lending guidelines for Marijuana Property Loans, check out our other blogs or call us at 303-377-4181.